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(i) Draw and label a supply and demand diagram with a short run supply curve. (ii)...

(i) Draw and label a supply and demand diagram with a short run supply curve. (ii) Shift out the demand curve and show the short run effect on output and price. (iii) Show the long run effect on price by drawing a second short run supply curve. Use this short run supply curve to trace out the position of the long run supply curve. Do (i), (ii) and (iii) for a. a constant cost industry and b. an increasing cost industry. Fully explain your diagrams. c. Explain intuitively why the long-run price elasticity of supply is greater than the short-run elasticity.

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